I have wheat in my hand even if they look directly at the animals they still won't follow me. Also, there is no button at the bottom that says feed. Why?
Minecraft for the Xbox 360 (MCX360) is a ported version of a much older version of the game - 1.6. Because of this, we don't get many of the newer features like breeding sheep and enchanting.
Don't worry, though, they have announced they will be updating MCX360 to Beta 1.7.3, which means we can get Pistons! And I'm sure they will continue to update MCX360 to later versions of Minecraft when they can.